Risk Management

Table of Contents

II
II
Introduction Stakeholders Engagement
II

› Types of Risk › Risk Identification › Risk A

› Risk Categories

IV
IV
III
III

Risk Management Procedure Tools & Practices

› Risk Planning › Risk Monitoring

› Risk Identification › Risk Tracking
› Risk Assessment
Introduction
 Operational
Strategic › Cost Overrun
› Operational Controls
› Demand Shortfall › Capacity management
› Customer retention › Supply Chain Issues
› Integration problems › Employee Issues incl. fraud
› Pricing pressure › Bribery and Corruption
› Industry downturn › Commodity prices
› JV or partner losses

Types of Risks
› Macroeconomic
› Political Issues
› Legal Issues › Debt and interest rates
› Terrorism › Financial management
› Natural disasters › Asset losses
› Goodwill and amortization
› Accounting problems
Hazard
Financial
 Internal & External Risks

Internal Risks
External Risks
Strategic Operational Enablers

Demand Governance Access to Services People

Regulatory
Strategic Planning Processes Financial
Economical
Ethics & Values Business Interruption Technology
Socio- Political

Environment Stakeholder Relations Emergency Response Infrastructure

 Risk Categories

Product Design System/ Software Manufacturing All Other Project Management Quality

Product Performance Data Accuracy Assembly Consumer service Teamwork Quality system

Design Security Tools Environment Product cost Sigma Levels

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 Identification of Risk Categories
Risk Category Financial Financial Operational Operational Strategic Strategic

Customer
Risk Subcategory Funding Capacity Capacity Availability Demand Shortfall
Retention

Likelihood 2 3 3 4 5 5

Risk level
Profitable Growth

Low Price

Develop New product

Leverage Technology

Risk Score by Risk Category

 Risk Severity Dial

Medium
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Low High
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Stakeholders
Engagement
 Risk Appetite

High

Exceeding Risk Appetite

Medium
Impact

Within Risk Appetite

Low

Obtain an estimate of the risk appetite of the shareholders with

the help of the below bar graph. This will help in assessing the
acceptable risk level

Low Medium High

Likelihood
 Risk Tolerance

Very Low Low Moderate High Very High

0.7 0.2 0.1 0.9 0.5

Insignificant
Cost increase
<10% cost increase 10- 20% cost increase 20- 25% cost increase > 25% cost increase

Insignificant fall 7-10% schedule 10-15% schedule 15-20% schedule

Schedule <7% schedule slippage
in schedule slippage slippage slippage

Insignificant scope Minor areas of Major areas of Reduction Project end item
Scope decrease scope affected scope affected unacceptable is useless

Only demanding
Barely noticeable Reduction requires Reduction Project end item
Quality applications are
degradation approval unacceptable is unusable
affected
 Risk Tolerance

Impact

Loss of key managers

Business continuity
problems Supplier default
IT problems

Product or service
Loss of key partnerships
quality

Poor project management

Likelihood
Risk Management
Procedure
 Procedure for Managing Risks

Risk Planning Risk Register

Risk Monitoring

Risk Tracking Risk Assessment Risk Identification

 Risk Assessment
Risk Rating Guide
Probability Impact Impact
Very
› Major uncertainties remain › Performance, quality, cost or safety impacts resulting in Low Med High
High
High (5) › No or little prior experience or data major redesign and program delay
› Infrastructure and/or resources not in place
Very
1 3 5 R Show stopper
High

› Some uncertainties remain Significant

› Performance, quality, cost and/or safety impacts resulting High 5 15 25 O

5
Medium (3) › Some experience and data exist
in minor redesign and schedule adjustment risk
› Infrastructure in place but under-resourced

Proceed w/
Med 3 9 15 Y

3
caution
› Few uncertainties remain › Performance, quality, cost and safety requirements met
Low (1) › Significant experience and data exist within planned schedule
› Infrastructure in place and fully
Low 1 3 5 G No concern

1
Risk Scoring System
Consequences Likelihood of Occurrence Likelihood of Detection
1. No. direct effect on operating service level E. Probability of once in many years A. Detectability is very high
2. Minor deterioration in operating service level D. Probability of once in many operating months B. Considerable warning of failure before occurrence
3. Definite reduction in operating service level C. Probability of once in some operating weeks C. Some warning of failure before occurrence
4. Source deterioration in operating service level B. Probability of weekly occurrence D. Little warning of failure before occurrence
5. Operating service level approaches zero A. Probability of daily occurrence E. Detectability is effectively zero
 Risk Assessment (Cont.)
Consequences

Insignificant Minor Moderate Major Catastrophic

Likelihood 1 2 3 4 5

A. Almost Certain - - - - -

B. Likely - - - - -

C. Possible - - - - -

D. Unlikely - - - - -

E. Rare - - - - -

Extreme Risk High Risk Moderate Risk Low Risk

Immediate Action where senior Management responsibility Managed by specific Managed by
management get involved Should be specified responsible person routine process
 Risk Register
Probability Impact
Type Risk Response Risk
Description of Risk
of Risk H M L Perf. Cost Time
Strategy Owner

Lack of acceptance by Market observation, alternative

Design 50k-500k Investor
investor of design proposals designing solutions

Earlier diagnosis of the situation in local

Delays and difficulties in obtaining
Design 500k-2m authorities offices, organization of meetings Investor
opinions and permits
preceding designing process

Conflict among designing Response of a team leader to all forms

Design 50k-500k Designer Office
team members of conflicts – mediation in a team

Proposing for employees to work overtime or

Overly optimistic assessment
Design 50k-500k ordering of part of work to another designing Designer Office
of employee workload
team

Incorrect information from investors Application to investor for extension of time to

Design 2m-5m Investor
and lack of clear guidance complete a design due to additional circumstances

Acceptance of unrealistic deadlines in Employment of new employees or ordering part

Time 2m-5m Designer Office
contact of work to another party during a contract

Underestimation of Limiting scope of design to

Budget 2m-5m Investor
design budget necessary minimum.
 Risk Management Plan

Proposed risk
Type of Existing risk treatment Additional Person
Outcome Rating treatment actions to Target Date
Risk actions in place Resources Responsible
mitigate risk

Performance Proper assessment of Detailed understanding John

Strategic risk 2 Your text here 31/4/2018
Deterioration underlying strategies of the market Smith

Performance Proper assessment of Detailed understanding John

Strategic risk 2 Your text here 31/4/2018
Deterioration underlying strategies of the market Smith

Performance Proper assessment of Detailed understanding John

Strategic risk 2 Your text here 31/4/2018
Deterioration underlying strategies of the market Smith

Performance Proper assessment of Detailed understanding John

Strategic risk 2 Your text here 31/4/2018
Deterioration underlying strategies of the market Smith
 Risk Identification

Time Cost
› Budget Exceeded
› Schedule overruns
› Unanticipated
› Tasks omitted from Schedule
› Expenditure
› Opportunity to compress Schedule

Resources
Communication Identify › Team is under-resourced
› Materials shortage
› Poor communication (Stakeholder Risks › Machinery unavailable
dissatisfaction) › Industrial Action
› Positive & timely communications › Skills gap
(positive publicity)

Environmental
Scope
› Bad weather results in re-work
› Scope creep › Weather delays progress
› Scope poorly defined › Adverse effects occur
› Project changes poorly managed › Environmental approvals not complied
with
 Risk Identification
How Long Can You Contingency in case
Impact of Doing Without? Vulnerabilities?
Do Without? of a disaster?

Use paper reports for 5 days then go

Equipment 5 days
After five days no way to schedule No UPS/ generator,
manual for as many members as
(IT only) production or track orders MD hardware, SPOF SME
possible
Look for warehouse space, attempt to
Metal building, flood zone,
No production, potential for bankruptcy, salvage
0 days poor maintenance, no perimeter security,
Facility IT non- existent equipment and restart operation, file
door lock broken
bankruptcy
Degraded operations, Best effort shifting of
0 days Too many SPOF
Personnel low service levels available staff, temps

30 days before
None until on hard exhausted Single supplier relationship Search for alternatives supplier
new deliveries
Raw Materials
30 days in
No suppliers, No deliveries Location, design of entrance None
2 days out
Transportation Extrusion shuts down, lines cleaned, waste
System 0 hours/power Single power feed, no generator
collected and prepared for grinder, IT non- None
0 hours/water or backup water supply
existent

Utilities 4 hours No call center Mercy of vendor Being in-house

Vendors (Sourcing)
 Risk Analysis – Complex
Control Measures Risk Analysis Additional Control Risk Analysis (with additional controls)
Description of Risk (Detail any existing Controls)
(Detail additional to be
C L Risk Rating implemented Controls) C L Risk Rating

Step 1: Consider Step 2: Consider Likelihood Step 3: Calculation Risk

What is the consequence of the hazard occurring. Consider what is the 1. Take Step 1 rating and select correct column
What is the likelihood of the hazard consequences occurring in Step1
most possible consequence with respect to work 2. 2. Take Step 2 rating and select correct row
3. 3. Use the risk score where the two ratings cross on the matrix
Safety at work Regulatory Almost Is expected to occur in most below.
Extreme Sickness Non compliance H = High, S = Serious, M = Medium, L = Low
Certain Circumstances (once per year)
Min Maj Crit Ext
Critical Casualty Major non Likely Will probably occur once (every 5 year) Almost Certain S(A4) S(A3) H(A2) H(A1)
compliance

Likelihood
Possible Event might occur at some time (10years) Likely M(B4) S(B3) H(B2) H(B1)
Major Medical treatment Warning
Possible L(C4) M(C3) S(C2) S(C1)
Minor non Unlikely/ Event expected to occur only in exceptional
Minor First aid compliance Rare circumstances (20+ years) Unlikely Rare L (D4) M(D3) M(D2) S(D1)
 Risk Analysis – Simplified
Impact to Project if
Risk Items (Potential Future Problems Likelihood of Risk Priority (Likelihood
Risk Item Does
Derived from Brainstorming) Item Occurring * Impact)
Occur

New operating system may be unstable 10 10 100

Communication problems over system issues 8 9 72

We may not have the right requirements 9 6 54

Requirements may change late in the cycle 7 7 49

Database software may arrive late 4 8 32

Key people might leave 2 10 20

 Almost Certain
Medium Risk High Risk
High Risk
Risk Matrix

Use the Risk Matrix during risk

Possible
Medium Risk
assessment to define the level of risk by High Risk
Low Risk
considering the category of probability or
likelihood against the category of
consequence severity. This is a simple
mechanism to increase visibility of risks
and assist management decision making.

Rare
Low Risk
Low Risk Medium Risk

Insignificant Moderate Significant

 Risk Response Matrix
Who is
Risk Event Response Contingency Plan Trigger
responsible

Mitigate: Test prototype Work around until

Interface Problems Not solved within 24 hours John
help comes

Mitigate: Test prototype

System Freezing Reinstall OS Still frozen after one hour Louise

Mitigate: Test Demonstration

User Backlash Increase Staff Support Call from top management Helen

Mitigate: Select Reliable Vendor

Hardware Malfunctioning Order replacement Equipment fails Tom
Transfer: Warranty
 Risk Tracker
Description
ID Impact Risk Response Risk Level Risk Owner Notes
of Risk
Confirm delivery dates
1 Supplier Delay Pushes Launch High John Add notes here
by Phase 2

2 Factory Availability Cost Overruns Stakeholder trip to China High Dave Add notes here

Steering Committee Define Marketing

3 Delay Launch Marketing Low Carey Add notes here
Unavailable Plans in March

10

11
 Risk Item Tracking

Monthly Ranking
Risk Items Risk Resolution
This Month Last Month # of Months

Inadequate Planning 1 2 4 Working on revising the entire project plan

Poor Definition of Scope 2 3 3 Holding meetings with project customer and

sponsor to clarify scope

Absence of leadership 3 1 2 Just assigned a new project manager to lead the

project after old one quit

Poor Cost Estimates 4 4 3 Revisiting cost estimates

Poor time Estimates 5 5 3 Revisiting schedule estimates

Tools & Practices
Tools & Practices
Quantitative
Analysis

Impact &
Probability Qualitative
Analysis Analysis

Risk Mitigation
Strategies
 Risk Impact & Probability Analysis
Impact Cost Time Quality

Manageable by exchange against Slight slippage against internal Slight reduction in quality/scope, no
Very Low Internal budgets targets overall impact

Require some additional Slight slippage against key milestones Failure to include certain ‘nice
Low funding from Institution or published targets to have’ elements

Requires Significant additional Delay affects key stakeholders – loss Significant elements of scope for
Medium funding from Institution of confidence in the project functionality will be unavailable.

Requires Significant Failure to meet key deadlines in

Failure to meet the needs of a large
High reallocation of Institutional relation to academic year or
proportion of stakeholders
funds (or borrowing) strategic plan

Increases threaten viability of Delay jeopardizes Project outcomes effectively

Very High project viability of project unusable
 Risk Mitigation Strategies

Technical Risks 1
• Emphasize team support and avoid stand-alone project
Structure
• Increase project manager authority
• Improve problem handling and communication
• Increase the frequency of project monitoring

2 Cost Risks
• Increase frequency of project monitoring
• Improve communication, project goals
understanding, and team support
• Increase project manager authority

Schedule Risks 3
• Increase the frequency of project monitoring
• Select the most experienced project manager
 Risk Mitigation Plan

Monitor any updates on

popular web browser and / or
Update client more frequently bootstrap and make sure all UI
along the way with project Perform periodical check design works as intended on
progress on server status updated web browsers or
responsive bootstrap

Client Management Server Technical

Identified Risk
Miscommunication with sponsor or
Identified Risk
Server is down which causes project to be
Identified Risk
Popular web browsers may get
client regarding project requirement slightly delayed due to application not an update that will discontinue support for
and expectations able to load features used in our development as we using
responsive bootstrap.
 Qualitative Risk Analysis
Impact 1 2 3 4 5

Probability Negligible Minor Moderate Significant Severe

Low Moderate High

(81-100)% Risk Risk Risk
Extreme Risk Extreme Risk

Low Moderate High

(61-80)% Minimum Risk
Risk Risk Risk
Extreme Risk

Low Moderate High High

(41-60)% Minimum Risk
Risk Risk Risk Risk

Low Low Moderate High

(21-40)% Minimum Risk
Risk Risk Risk Risk

Low Moderate High

(1-20)% Minimum Risk Minimum Risk
Risk Risk Risk

Project Risk (Threat & Opportunity) Matrix: Any Risk with a probability of over 80% will be treated as a fact and will be addressed in the Project Management Plan and not in
Risk management. Risk Threshold( which risks move forward) in the process and which one will be
 Quantitative Risk Analysis

Risk Title & Total Mitigation Contingency

Resp. Due Date Cat. Rating Prob. Impact
Description Score Actions Plan

Cost Risk
Borrow money from the
Find a partner to help
ABC 5/31 Cost High .80 4 3.20 share costs
bank or investor to fund
Insufficient funds to the effort
support the bid

Schedule Risk Borrow additional

Hire additional proposal
BMC 6/1 Sched. Low .55 4 2.20 proposal staff from
staff or consultants
Insufficient resources to another division
finish work on time

Risk Score = Probability * Impact Risk Probability values are between

0.1 (Remote Chance) – 1.0 (Certain)

Risk Score values are between Risk Impact values are between
1-4 (with 4 being the highest risk) or red, yellow, green, blue. 1 (insignificant) - 4 (Unable to meet objectives)
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